Supply glut puts MediaTek sales at 10-month low

By Lisa Wang / Staff reporter

Wed, Jan 09, 2013 - Page 13

MediaTek Inc (聯發科), the nation’s top handset chip designer, yesterday missed its fourth-quarter revenue target after posting its weakest monthly revenue in 10 months for last month due to excess inventory.

Revenue shrank 12.38 percent to NT$7.58 billion (US$260 million) last month, compared with NT$8.65 billion in November. That brought fourth-quarter revenue to NT$26.73 billion, much lower than the range of between NT$28.90 billion and NT$30.90 billion forecast earlier.

The figures missed the expectations of Eric Chen (陳慧明), a senior semiconductor analyst with Daiwa Capital Market based in Hong Kong. Chen had expected MediaTek’s revenue for last month to grow 5 percent month-on-month.

Inventory rose to 10 million units at end of last year, indicating that “MediaTek’s fourth-quarter revenue would hit the lower end of its revenue guidance,” Chen said in a report released on Monday.

That could reflect that demand from China was not as strong as MediaTek thought it would be in October last year. MediaTek president Hsieh Ching-jiang (謝清江) attributed his bullish revenue forecast mostly to robust smartphone demand from Chinese handset makers.

Hsieh told investors that strong demand from China might help the company offset the impact of weak seasonal demand. However, the firm’s fourth-quarter revenue ended down 9.3 percent from the NT$29.47 billion it posted in the third quarter.

Excess inventory also led to a 15 percent sequential decline in revenue in the current quarter, which would result in a larger contraction compared with the average quarterly dip of up to 5 percent the company has seen in the past five years, Chen said in the report.

To reduce inventory, MediaTek is expected to cut prices for its chips from 5 percent to 15 percent depending on the product, Chen said. This would cut gross margin to about 41 percent, he said.

However, Chen said that the weakness would only be short-term. He maintained his “buy” rating on the company’s stock and suggested investors increase their holdings as share prices fall.

He also maintained his six-month target price of NT$383 for MediaTek shares, which would translate into an approximately 27 percent rise from the stock’s NT$302.50 closing price yesterday.